CGT in Australia: how the 50% discount works, and the 2027 changes

Australia has no separate capital gains tax. A capital gain is added to your income for the year and taxed at your marginal rate along with everything else. What the rules decide is how big the gain is. Here is how the pieces fit together.

Step 1: the gain

A capital gain is what you receive when you sell, less the asset’s cost base: what you paid, plus the costs of buying, holding in some cases, and selling it. The gain only exists when you sell or otherwise dispose of the asset. A rise in value you haven’t sold isn’t taxed.

Step 2: losses come off first

A capital loss is the same sum coming out negative. Losses can only be used against capital gains, not against wages. They are subtracted from the year’s gains before the discount is applied, and a loss bigger than the year’s gains is carried forward to later years.

Step 3: the 50% discount

An individual who owned the asset for at least 12 months before the sale pays tax on only half of the gain. That is the rule for sales before 1 July 2027; the section below covers what replaces it. Trusts can pass it on to individuals; a super fund gets a one-third discount instead; a company gets none. Foreign residents can’t claim it for gains since 8 May 2012.

An example

Someone buys shares for $20,000 and sells them three years later for $30,000. In the same year they sold another parcel at a $2,000 loss.

• Gain on the shares: $30,000 − $20,000 = $10,000.
• Less the $2,000 loss: $8,000.
• Held more than 12 months, so the discount halves it: $4,000.
• The $4,000 is added to taxable income for the year, so the tax is the extra tax that income adds at their marginal rate, plus the Medicare levy.

Had they sold after 11 months, the full $8,000 would be added. Timing a sale by a few weeks can change the taxable amount by half, which is why it is a common planning question, and why it belongs in a projection.

Property and the main residence

The home you live in is generally exempt from capital gains tax. If it was also rented out or used to earn income, or you lived in it for only part of the time you owned it, the exemption can be partial and the gain is split by days. An investment property is taxable on sale, with the same 12-month discount. The costs of buying it, including stamp duty, form part of its cost base, so they reduce the gain (see the upfront costs of buying a home).

What changes from 1 July 2027

The Treasury Laws Amendment (Tax Reform No. 1) Act 2026, assented to on 26 June 2026, rewrites the rules for an individual’s capital gains from 1 July 2027. As the Act sets it out:

• Most gains are no longer halved. The cost base is indexed by CPI, and a resident individual’s gain is taxed at no less than 30%.
• Everything an individual holds at the end of 30 June 2027 is treated as sold at market value and reacquired the next day, and the 50% discount is kept for gains deferred from that deemed sale.
• The 50% discount is also kept for new residential dwellings.
• From the 2027–28 assessment, a net rental loss on an established dwelling acquired after 7.30 pm on 12 May 2026 is quarantined rather than set against other income.

The detail has exceptions and transition rules, so the Act and the ATO’s guidance are the source for any particular sale. The point for a long-range plan is that a sale in 2026–27 and the same sale in 2028–29 can be taxed on different bases, so the year of a sale is part of the sum.

Why a plan needs it

When a plan sells an asset to fund a purchase or a retirement, the tax on the sale changes how much is left. A projection that ignores the discount, or taxes the whole gain, can be well out on a single sale. My Runway works out each sale’s gain, applies losses and the 50% discount by parcel date, and adds the result to that year’s taxable income.

From 1 July 2027 it applies the changes above. It splits each gain at 30 June 2027, using the plan’s own projected value on that day, or a valuation you enter in the asset’s details. It discounts the part before, and indexes the cost base for the part after. The CPI isn’t known years ahead, so the indexation follows the plan’s inflation assumption, quarter by quarter. It adds the minimum tax where it applies, and carries a quarantined rental loss forward. A property you mark as a new dwelling keeps the discount, and its rental loss is deducted as before.